Reconciling the Budget- Part 3

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Hey everyone,

I hope you all are having a great week so far. Labor Day weekend is not too far away.

I wanted to let you all know that reconciling will be a 4 part series instead of a 3 part series (one more post after this post). I apologize about this. As mentioned before, there is so much information to share about this part.

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Today, I will discuss the third part of reconciling your budget (which is the first part of doing the actual reconciliation of your budget).

In this process, you will be making sure that your income and expenses are correct for the month.

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Before you start this process, make sure you get the following information:

  • All of the receipts, copies of bills, and deposit slips you have kept with you (from the previous month)
  • Copies of your bank statements or printouts and credit card transaction logs you can get online with those accounts(from the previous month) Don’t use credit card statements because the most recent statement might have transactions that have occurred a month or two ago (and are not relevant to the previous month). They also don’t include half of the transactions for the current month you are working on.
  • The source you choose to record your income and expenses

Here’s how to double check your recordings of your income and expenses based off of the following sources:

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Notebook

  • Go to your income page. Get all of sources that are related to income (deposit slips, paystubs, or bank statements). Find the first income transaction you have recorded. Find a source that confirms that transaction took place. Once you have done that put a check mark by it. Also, mark the source you used. Check through all of your sources related to income (to see if they have been marked or not) to make sure you haven’t missed recording an income transaction. Once all of the transactions have been checked, add them up for a total for the previous month.
  • Go to your first expense page. Find the first transaction for that expense you have recorded. Find a source that confirms that the transaction took place (receipt, bank statement, credit card printout, copy of a bill). Once you have found that, put a check mark by that transaction. Mark the source you used as well. Do this for each expense page you have. Go through each source you have to make sure you haven’t missed recording a certain expense. If you have missed recording it, put it on the appropriate expense page. Once all of the transactions for each expense page have been checked, add them up for a total for the previous month (for each expense). Beware that there are some transactions at the end of the month that might not clear until the current month. Please do not delete those out. Also, do not include transactions that cleared at the beginning of the previous month for the month before.
  • Get all of your totals on a separate sheet of paper in a list format (with Income on top and Expenses below that)

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Spreadsheet

  • Find the cell you recorded your income in. Go through your bank statement or bank transaction printout to see what actually went into your bank account for the previous month. Make sure that cell amount equals the total deposits you had for that month (Don’t include transfers from savings accounts or other internal source accounts). If not, see what happened. If it’s because you forgot to record a deposit from one of your paychecks, fix that cell amount. If it’s from an extra income source and gets electronically deposited into your account or if it’s holiday/birthday money you got, include it in your income.
  • Go to the first cell of the first expense on the spreadsheet (in the actual expense column, not your budget column). Find all of the receipts or bills related to that expense. Total them up. Also, make sure you go through your bank and credit statements or printouts for the previous month. Highlight the transactions that you have a receipt or bill that corresponds to what you have already totaled up. Find transactions that go with the expense you are analyzing that you don’t have a receipt on. Add those transactions to the total. Beware that there are some transactions at the end of the month that might not clear until the current month. Please do not delete those out. Also, do not include transactions that cleared at the beginning of the previous month from the month before.  If there are transactions that have cleared at the beginning of last month for the month before don’t include those. Keep your documents just in case. Once you do that, make sure the total matches what you have on the spreadsheet. If not, change the total to what you have. Do this for each expense you have recorded.

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Checkbook Register

  • Add up all of the income you have recorded in your check register. Make sure it matches what is your bank statement or printout for the previous month says.
  • Add up all of the transactions for each expense in your check register. Go through bank statements and make sure you are not missing any transactions in your register (e.g. Bank Fee or a debit that you might have forgotten about). Include the missing transactions in your total. Also, if you have credit card transactions from your printout for that certain expense, include those in your total for that expense category.
  • Put all of your totals together on a list in a notebook or source you want to use. Don’t lose that sheet.

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Software program

  • Go through all of your income and expense source receipts or bills you have and make sure they have been recorded into that software program. Also, make sure they have been recorded into the right bank or credit card account.
  • Reconcile all of your bank accounts. Beware that there are some transactions at the end of the month that might not clear until the current month. Please do not delete those out. I recommend you do this to make sure you didn’t miss any transactions or misrecorded a transaction.
  • Go through your credit card printout and make sure that you did not miss recording any transactions. Don’t include transactions that cleared at the beginning of the previous month for the month before. Don’t worry if there were transactions at the end of the month that are not on there. They will usually clear in the current month.
  • Go to the reports section and print out a report that will tell you what your income and expenses were for the previous month. Get one with just numbers. On some software programs it’s called a Profit and Loss report.

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Tomorrow, we will go over the final part of reconciling your budget. I promise you, we will be finished tomorrow with this. I apologize if this is aggravating some of you. I just want to make sure you are doing this stuff correctly, so you don’t have financial issues later on.

If you have any questions about this, please let me know.

If you liked this post, please like, subscribe, and share with you friends.

Thank You and Have A Great Day

Millennial Dude

Reconciling the Budget- Part 2

 

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Hey everyone,

I hope you all are doing well. I’m doing great. The weekend has just started for me.

Today, I would like to continue on reconciling your budget.

This will actually be a 3 part series, not a 2 part series. I didn’t know this was going to be a lot of information to share. I apologize about this.

Yesterday, we talked about how to keep track of what you earned and spent.

Today, I would like to tell you how to record that information into your source of choice (from last blog post).

Next week, we will do the actual reconciliation of your budget.

As I mentioned yesterday, you need to find a place to record what you have earned and spent.

Now, I am going to tell you how to record that information properly depending on the source you use.

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Here’s what you need to do if you decide to record the information into a notebook (find a way to keep months separate such as color coding):

  • Have a page for just your income. On this page, record all of the money that went into your main bank account (and the date the money went into your account).
  • Make a page for each expense you have. Record all of the money you spent on each expense on that specific expense page (e.g. Receipts for groceries need to go in the Food or Grocery Expense page) and put a date next to it (the date you spent the money for that expense).

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Here’s what you need to do if you decide to record the information on a spreadsheet software program:

  • Use the spreadsheet document you recorded your budget on.
  • Create 2 more columns on that document
  • Use the first column to record what came in and out of your account
  • Use the second column to record what you have left over.
  • On the second column, start your first or second cell with the total income you had coming into your bank account (To get that number click that cell and put an equal sign and the first deposit amount and then the plus sign and then the second deposit amount and so on). Record all of your income on that cell.
  • On the first column (where the expenses go) record each transaction for a certain expense to the cell that corresponds to the row of that expense on your budget. For example, let’s say you bought $100 worth of groceries for 2 weeks. You would find the cell on the first column that would correspond to the grocery expense you recorded in your budget. Next, you would put either (=100+) in that cell or add the 100 to the other amounts you spent on groceries that month (=125+100+)
  • Next, go back to the second column you created. Find the cell that corresponds with the first expense you have created for your budget. In that cell you will put an equal sign and the letter and number of the cell you recorded your income in. Put a minus sign after that cell letter and number. Then, put the cell letter and number of the first column (you just created) that corresponds with that expense.
  • On the cell for the next expense in the second column, put an equal sign in that column. After the equal sign, put the cell letter and number of the cell above. Next put a minus sign. Then, put the cell letter and number of first column (you just created) of the corresponding expense that you are working on after the minus sign. Keep on doing that until you have all of your expenses with this formula.
  • If this sounds confusing, please check out a spreadsheet I did last October (click the link below) to see what I’m talking about.

https://docs.google.com/spreadsheets/d/1-4qjZ3eFytuW3BvwuD5zJdf02MO9rM9nsb_bgO5l5MA/edit?usp=sharing

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Here’s how to record what came in and out of your account with a checkbook register:

  • Record the transactions like you normally would in a checkbook register (e.g. Date, place, and amount)
  • After you record the transaction, put an initial of what the expense went to (e.g. “G’ for Groceries) or if it was a deposit initial it as “I” for income.

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Now, here’s how to record what you earned and spent in an accounting computer software program:

  • For money coming in, record it as a deposit with the date and amount that went into your account.
  • For money coming out, record it as a check with the date, amount, and the appropriate expense account.
  • Or see if the software program allows you to import the transactions from your online bank account (if you use online banking) to your software program and code them to the proper account. My only issue with this is that some names of stores are different on the bank statement versus the name your are familiar with (e.g. A Shell station could be labeled Three Grandmas Inc and you wouldn’t know what it went to- unless you kept the receipt).
  • If you have questions regarding this, please go to the Help menu of your software program and they should tell you how to do this properly. They usually have online support as well to assist you with this.

Please let me know if you have any questions.

If you liked this post please like, subscribe, and share with your friends.

Next Wednesday, we will discuss the actual reconciling part of budgeting.

Thank You and Have A Great Weekend

Millennial Dude

 

Reconciling the Budget- Part 1

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Hey everyone,

I hope you all are having a terrific Thursday. It’s going alright for me so far.

Today, I would like to start talking about reconciling your budget. This will be a two part series.

What does this mean?

It means that you are comparing what you project to earn and spend each month (the budget you will create at the beginning of each month) to the actual amount of money you earned and spent for that month (usually done at the end of the month or beginning of next month).

For all of the people that have taken Accounting or Bookkeeping classes, reconciling your budget is not the same thing as reconciling your checkbook every month. With this, you compare what you have recorded you spent versus what cleared the bank account.

Why should you do this?

  • To see if you need to make an adjustment on your budget– Sometimes you might not budget enough for certain expenses (e.g. Personal expenses; Gas expense). This helps to see if you need to increase the budget amount for that expense or not. It also happens the other way around where might budget too much for a certain expense. In that case, you would have to lower your budgeted amount for that expense.

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  •  To help create sinking funds for certain expenses that fluctuate from month to month– Let’s say you budget Utilities for $100 per month. In October the amount you actually spent on that is only $75. However, you spent $125 in utilities in November. In this case, you can save up the $25 you had left over in October to cover the overage of $25 in November.

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  • To see if you can make an extra payment towards your debt– Reconciling my budget every month has helped me pay off my student loan quicker than I thought. If I had extra money, I would put a portion of towards what I owed on my student loans. Because of this, I was able to pay off my student loan in full in July.

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  • To start scrounging up money for upcoming holidays- Thanksgiving, Christmas, and other holidays that celebrated during that time of year are about to be here as soon as we know it. Using extra money to save up for those events will put less of a hurting on your bank account when they come.

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How do you go about doing this?

First, you need to keep track of how money came in and how much money came out of your personal banking accounts.

How can you keep track of the money that you get each month?

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  • By keeping copies of the deposit slips each time you go to the bank to deposit your paycheck or other money that you have earned.
  • By keeping copies of pay stubs or logging into your online bank account and seeing how much was deposited into your account if you get paid through Direct Deposit.

How can you keep track of what you have spent each month?

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  • By keeping receipts of purchases you have made (e.g. Groceries; Personal Needs)
  • By keeping copies of bills you have paid each month (e.g. Utility Bill)
  • By keeping copies of payment confirmations for payments or purchases you have made online (e.g. Paying your phone bill online)
  • By keeping emails of automatic drafts some companies you pay bills to give you (e.g. E-mail of an automatic draft coming out of your bank account for a student loan payment)

Now here’s a couple of tidbits of advice when you are doing this:

  • Get a folder where you can put all of your documents of what you have earned and spent (look at the last 2 paragraphs to see what I’m talking about). This will prevent information from getting lost. I’m awful at losing receipts sometimes if I don’t use a folder.
  • Find a place to record this information (this will help you with the next step we will discuss tomorrow)

-The best places to do this are in a notebook; computer spreadsheet software program (e.g. Excel or Google Spreadsheets); a check register; or accounting software (e.g. Quickbooks; Quicken; Microsoft Money).

-When recording this information, write down what actually went into your bank account (if you are using pay stubs write down the net amount, not the gross amount) and what you actually spent to the appropriate category it belongs to.

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Tomorrow, we will discuss how to record what you have earned and spent and how to do the actual reconciliation of your budget.

If you have any questions, please let me know.

Please like, subscribe, and share with your friends if you liked this post.

Thank You and Have A Great Day

Millennial Dude

 

Zero-Based Budgeting

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Hey everyone,

How are you all doing this week? I’m doing alright. I can’t wait until Fall time gets here.

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Last week, we discussed about creating a budget.

However, there was a concept I forgot to mention on the last post (it goes in the final steps of budgeting). I completely apologize about that.

Financial experts call this concept zero-based budgeting.

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What does this term mean?

It means that you should not have a remaining balance on your budget for every month. All of the money you earn each month should go towards something.

Click the PDF link below to see my zero based budget for an example of what I’m talking about.

Budget for 2016 – Sheet1

If I have money left over, where could that money go towards?

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  • Retirement account

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  • Business venture you want to do

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  • Vacation

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  • Big purchase (We’ll go over creating a wish list later)

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  • Extra debt payment

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If you have any questions about “zero-based budgeting” please let me know.

Tomorrow, we will discuss how to reconcile your budget once each month is over.

If you liked this post, please like, subscribe, and share with your friends.

Thank You and Have A Great Day

Millennial Dude

How To Create A Budget- Part 3

 

 

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Hey everyone,

As we all know the weekend is coming up.

It sounds like a good time to do the final step of creating a budget (and doing the first 2 steps we discussed).

This step is getting all of the information you obtained from the first two steps together and combining it; eliminating expenses that are hurting your budget; and organizing the information to a workable document you can use each month.

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Before you do all of that, you need to find a place to record the information to make it into a usable form.

I recommend using one of the following methods:

  • Notebook (Spiral or composition one)
  • Spreadsheet software (e.g. Microsoft Excel or Google Docs Spreadsheets)
  • Ledger paper (You can find them usually at an office supply store)

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It doesn’t matter which method you choose, but it needs to be one that you will use consistently and frequently. It makes no sense to use a method that you won’t be seeing at all.

Now, you need to get the monthly income amount you got from the first step of creating a budget and record that number down. That will be your Total Income amount for the month.

Next, write down the amounts you came up with for your monthly expenses from the second step of creating a budget.

Add up all of the totals of each monthly expense and write down that number. That number will be your Total Expenses amount for the month.

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Subtract your Total Expenses from your Total Income.

If you get a negative number, find out what expenses you can eliminate or reduce in your budget (Think of expenses you don’t use as much and variable expenses- e.g. Subscription to a magazine you don’t read that much or Groceries).

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If you have a positive number, keep on keeping on. However, there are still ways you can reduce on some of your expenses.

I will give you tips on how you can reduce the amount you pay for certain expenses each month next week.

If you have any questions along the way please let me know.

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If you enjoyed reading this post, please like it and subscribe to my blog.

Have A Great Weekend

Millennial Dude

 

How To Create A Budget- Part 2

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Hey everyone,

How are you all doing today? I’m doing well.

Yesterday, we started discussing budgeting and we talked about figuring out your income.

Today, I plan on talking more about making a budget by figuring out your expenses for the month.

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First off, start going through the past 12 months of your bank and credit card statements and record all of your purchases. Code those purchases into expense categories and add up all of the purchases in each category to get a total amount for each category for each month.

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Once you have finished that, realize that your expense categories your expenses will fall into type of amount categories (you need to understand this before we go any further) :

  • Consistent amount expenses– These are the expenses that will usually stay the same amount each month no matter what (e.g. Rent, Phone, Cable, Insurance, Loan payments)

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  • Variable amount expenses- These are the expenses that will differ from month to month (e.g. Groceries, Personal Expenses, Electricity, Water, Gas and Transportation fees)

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Now, let’s start creating the expense totals for your budget.

Here’s how to do that:

  • For consistent amount expenses, just go ahead and record the expense category and amount you pay each month for that expense onto your expense list for your budget.
  • For variable amount expenses, add up the total amounts for each variable expense for each of the past 12 months (e.g. Add up what you spent on groceries for each month from the 1st month to the last month) and get a total amount on what you have spent for the year for each variable amount expense. Divide the total amounts by 12. Put those answers and the expense categories on your budget. This will give you an average on what you spend each month on those expenses.

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I’m going to warn you now that recording what you have spent for the past 12 months and coding them to the proper expense category will probably overwhelm and bore you to tears. I recommend doing 1 to 2 months a day (You can do more if you haven’t spent that much money). This helps prevent mental exhaustion and boredom.

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Tomorrow, we will get your budget put together, organize and clean it up.

If you enjoyed this post, please share it with your friends and subscribe to my blog.

Thank You and Have A Great Day

Millennial Dude

How To Create A Budget- Part 1

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Hey everyone,

I hope you all have had a great week so far.

Last week, I went over goal setting.

This week, I would like to go over creating a budget.

Why is a budget important?

A budget will help you stay financially focused while saving money.Doing a budget each month also tells you where your money is going each month. With this, you won’t be surprised that a chunk of your pay is going to important expenses. It will also help you decide where to cut expenses at (so you don’t get broke down in the future.

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Today, I would like to go over the first step in budgeting. It is figuring how much money you are bringing in each month.

Let’s discuss this step further.

First off, you need to figure out if you have stable income or unstable income.

Stable income means that you are bringing home around the same amount of money each paycheck. (e.g. salary job; consistent hourly job).

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Unstable income means that you are not earning the same amount of money each month (e.g. commission job; inconsistent hourly job; seasonal job/business).

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Once you figure that out, then you must figure out how much money you are making each month.

If you have a salary or consistent hourly job, use one of these resources to figure out how much you get paid each paycheck:

  • Look at your bank statement from last month and see how much money was deposited into your account from your job. Round that amount to the nearest dollar and multiply that by the amount of times you get paid each month (If you get paid weekly it’s 4 times a month; If you get paid bi-weekly or bi-monthly it’s usually 2 times a month). Use that amount as your monthly income on your budget.
  • Check your last paystub and see how much they paid you. Go with the net pay, not the gross pay. That is what you get after your employer deducted the taxes that have to be paid to the federal and state governments out of your paycheck (and any other required deductions they have to take out under certain circumstances e.g. child support; wage garnishment for past due personal taxes).
  • If you just started a salary job,-go to www.paycheckcity.com. Choose the hourly  or salary calculator (depending on if you get paid hourly or salary). Select the state you live in. If you get paid salary, type in how much your gross salary is per paycheck. If you get paid hourly, type in the amount of hours you typically work and the amount of money you get paid each hour and have it calculated. Choose your filing status and allowances. Then I would click calculate and it would give me a net amount. I would round it to the nearest dollar and multiply by the amount of times you get paid each month to get the monthly income amount.

If you don’t make a consistent amount of money each month, go to this website (moneypeach.com/budget). This article tells you how to figure out your income if you do not get paid the same amount each pay period.

Once you figure out your income for the month, record it somewhere where the information will not get lost. You will put it on the income section of your monthly budget.

Also, don’t forget to include other extra consistent monthly income you get (e.g. child support, alimony) on your budget.

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Tomorrow, we will discuss how to figure out your monthly expenses to put on your budget.

I hope you enjoyed this post. If you did please like, share this post with your friends, and subscribe to my blog.

Thank You and Have A Great Day

Millennial Dude

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